The Federal Housing Administration (FHA) has announced that it will be lowering the premiums for mortgage insurance for individuals who are refinancing their loans due to the housing market improvement strategy by President Barack Obama.
The FHA has stated that it will be reducing the up-front premiums to bring them down from their former position at 1 percent, to 0.01 percent. This was indicated in a fact sheet that the Obama Administration began distributing on Tuesday. According to that same fact sheet, there will also be a reduction in the annual fees for individuals with FHA loans from before June 1, 2009, which had been at 1.15 percent, but will now be 0.55 percent.
Data from the FHA has indicated that the average borrower whose loan is eligible for these changes will experience an annual savings of approximately $1,000. It has suggested that by making these changes, it will broaden the streamlined refinance program’s reach, which had previously been limited as the fees were deterring many borrowers.
According to the fact sheet, “Lender reticence and fees have kept many families from participating.” In fact, it stated that there could be up to 3 million borrowers with FHA loans who could benefit from these changes. Borrowers who have FHA-insured loans and who are up to date with their payments are eligible for this streamlined refinance program.
As a result of this announcement, New York trading showed that there was a decline among those private mortgage insurers which are in competition with the FHA in providing loan coverage when borrowers have made a down payment smaller than 20 percent.